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DAX Index Tests Trend Line Support on Iran’s Retaliation Threats, German Data

Dax Index
Dax Index

Risk Aversion Dominates Sentiment

Just like the FTSE 100 and Asian equities markets, the DAX index is trading the red today on risk aversion. Germany’s blue-chip stock index is down over 240 points or 1.85% at 12,975.55. Meanwhile, DAX index CFDs opened this week’s trading with a weekend gap at 13,093.4.

The market’s negative sentiment is mainly fueled by recent developments in the Middle East. Last week, the US launched an air strike in Baghdad which killed Iranian General Soleimani. Following his death, Iran has threatened to retaliate against the US. In fact, Iran has announced an $80m bounty for US President Trump’s head.

Soleimani was a key military figure in the Middle East who was said to lead campaigns against ISIS. He supposedly approved the attacks to the US embassy in Baghdad by protesters two weeks ago. This was why he was targeted by the US.

Stocks Performance So Far in the Day

Losses are being led by Covestro AG at 6.32%. The stock tumbled following downward estimates to its yearly earnings. According to Jefferies Financial Group, the German polymer-maker is seen to clock in its earnings at $1.44, down from initial forecasts at $1.58. It is followed then by Infineon Technologies AG at -4.51%. The third biggest loser so far in today’s trading is Deutsche Bank at -3.21%. On the other hand, Vonovia leads today’s top performers at -0.23%.

Better-than-expected Reports Provide DAX Index with Support

The stock index is now finding some bids in the market as data from Germany top forecasts. German retail sales for November came in higher at 2.1% than the 1.1% forecast. Meanwhile, the German final services PMI was better at 52.9 versus the 52.0 consensus. Finally, the Sentix Investor Confidence report for January showed that investor confidence in Germany continued to improve this month. The reading came in at 7.6, more than double than what market participants were expecting at 3.0.

Read our Best Trading Ideas for 2020.

DAX Index Outlook

On the daily time frame, the DAX index looks to be testing support at the rising trend line. (when you connect the lows of August 15 and October 8). This price, around 12,967.0, also coincides with a previous support level. If sellers are able to sustain their bearish advances and the DAX index closes below the trend line, the next support to eye is at 12,504.0. This price used to be a resistance level and it seems to align with the 100 SMA.

On the other hand, if today’s candle closes as a doji or a hammer, we could see the DAX index re-test its record highs at 13,456.4.

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